A Banking Model That Works In The Badlands

North Dakota Badlands

Guest post by Wil Martindale of Let Them Fail

What's The Big Deal About State Banks? North Dakota Has The Answers

The only State in the Union chartered to be the primary depositor and guarantor of the deposits of its own bank is North Dakota. All state funds are deposited into this bank (by law) and its deposit base becomes the capital reserve from which to create credit.

Our system of hopelessly insolvent mega banks across the nation has leveraged, gambled and lost it all in the insane derivatives casino. Despite more than six months of massive taxpayer bailouts, credit markets are still frozen, the economy continues to collapse and 2.3 million more Americans have lost their jobs since Obama took office.

But North Dakota’s GNP has grown 56%, personal income has grown 43%, and wages have grown 34%. The state not only has no funding issues, but this year it actually has a budget surplus of $1.2 billion, the largest it has ever had.

Why? Because of sound fiduciary oversight and proper management.

You see, the Bank of North Dakota does not employ 20,000 people at an average wage of $90,000 per year. Employees do not receive $60,000 annual bonuses and executives do not take home $40,000,000 in compensation, bonuses and options. The State Bank of North Dakota does not wager 1000 times it’s deposit base (as Goldman Sachs does with a credit exposure risk of 1056% to capital ratio) on the speculative derivatives casino in order to grossly reward the risk that brought down the world’s economies.

In point of fact:

The Bank of North Dakota (BND) was established by the state legislature in 1919 specifically to free farmers and small businessmen from the clutches of out-of-state bankers and railroad Barons. By law, the State deposits all its funds in the bank, which pays a competitive interest rate to the State treasurer. The State, rather than the FDIC, guarantees the bank’s deposits, which are re-invested back into the State in the form of loans. The bank’s return on equity is about 25%, and it pays a hefty dividend to the State, which is expected to exceed $60 million this year. In the last decade, the BND has turned back a third of a billion dollars to the State’s general fund, offsetting taxes. The former president of the BND is now the State’s governor.

The BND avoids rivalry with private banks by partnering with them. Most private sector lending is originated by a local bank. The BND then comes in to participate in the loan, share risk, and buy down the interest rate. The BND provides a secondary market for real estate loans, which it buys from local banks. Its residential loan portfolio is now $500 billion to $600 billion. Guarantees are also provided for entrepreneurial startups, and the BND has ample money to lend to students (over 184,000 outstanding loans). It purchases municipal bonds from public institutions, and it backs loans at 1% interest. The BND also has a well-funded disaster loan program, which helps explain how Fargo, when struck by a disastrous flood recently, managed to avoid the devastation suffered by New Orleans in hurricane Katrina.

North Dakota has also managed to avoid the credit freeze, through the simple expedient of creating its own credit. It has led the nation in establishing state economic sovereignty.

That is the key — establishing economic sovereignty at the level of the States -that is the last vestige of hope for this country. TAKE ACTION in your state to be part of the solution.

It truly must be obvious to anyone in America able to read and think for themselves that this federal government, bought and paid for by the economic Imperialists, with its ranks completely infiltrated by former Wall Street executives, simply DOES NOT HAVE the best interests of the average taxpayer in mind.

Not when we are being sucked dry by the continuing bailouts, which do nothing but place the middle class backbone of this country into a debtor’s prison of taxation, reduced social services, pay cuts, lost jobs, tighter credit, and with no end in sight to the greed and excess of the profit-obsessed, predatory money changers they serve.

This is why it’s so important to TAKE ACTION now. Let the rest of the world deal with the White House. Trust me, they will. We the People must collectively take action at the level of the States, where politicians are still accessible and many still remember what it’s like to be true public servants.

If the pressure comes from the American taxpayer at the level of the States and the international pressure comes from the developed nation’s foreign governments, together, the real, hard - working people of the world can correct the problems on Capitol Hill, where neither body alone could.

TAKE ACTION in your state to be part of the solution now.

All photos are North Dakota Badlands